Increasing Yields: Alvarez-Dominguez from Brunel Discusses the Future of Renewable Resources
Brunel Pension Partnership Shifts Focus Towards Natural Capital Investments
Brunel Pension Partnership, a £35.9bn local government pension pool based in Bristol, UK, is transitioning from a strong focus on renewable energy investments towards building a dedicated standalone portfolio for natural capital. This strategic shift reflects Brunel's commitment to impact investing and pursuit of long-term returns.
The new mandate for natural capital is being developed separately from Brunel's infrastructure investments. The infrastructure strategies of Brunel, which have a significant allocation to renewables, have been reflecting strong demand from partner funds. However, the infrastructure team, led by Jaime Alvarez-Dominguez, has concerns about concentration risk due to the scale of exposure to renewables.
The strategy involves moving away from increasingly crowded renewables markets and targeting natural capital for its climate alignment, inflation protection, and uncorrelated return characteristics. Natural capital, as an attractive area for long-term returns beyond renewables, aligns with wider market trends showing strong investor appetite. In H1 2025, natural capital fundraising reached $7.9 billion, demonstrating robust demand for such climate-aligned and diversified asset classes.
One of Brunel's key co-investments in this new direction is in Bluesource Sustainable Forest Company, now known as Aurora. The aim of investing in Aurora was to reduce harvesting by 50% and generate additional revenue through carbon credits. If the carbon credits didn't materialize, Aurora would fall back on sustainable forest management.
Brunel Pension Partnership is not alone in this shift. Microsoft has recently announced a 10-year carbon removal deal with Aurora Forestry Credits. Brunel, through one of its infrastructure funds, is an early investor in Aurora.
Jaime Alvarez-Dominguez will speak at a Climate Solution Summit on 11 September, stressing the importance of strong standards, credible certification, and alignment with science-based targets for carbon credits. He remains optimistic about the broader outlook for carbon markets, driven in part by demand from large corporates with net zero targets.
Brunel's approach is to segregate natural capital into a new standalone mandate apart from its infrastructure portfolio, transitioning from renewables to natural capital and other transition assets as part of a broader impact investment strategy focused on sustainability and financial resiliency. This strategic shift is a testament to Brunel's commitment to sustainable and impactful investing.
[1] Brunel Pension Partnership website: www.brunelpensionpartnership.org.uk [2] Global Data: www.globaldata.com [3] Brunel Pension Partnership press release: www.brunelpensionpartnership.org.uk/news [4] Financial Times: www.ft.com
- In alignment with its new focus, Brunel Pension Partnership is increasingly investing in environmental science, particularly natural capital, aiming to generate long-term returns while fostering climate-change solutions.
- Recognizing the potential of diversified assets, Brunel Pension Partnership is extending its investment horizon beyond renewables, venturing into financing opportunities with climate-change related environmental-science projects, such as carbon-credit generating initiatives in forestry companies.
